Collusion means reduced wages

By L.M. Sixel, Houston Chronicle

September 27, 2015

A wage-fixing case involving some household-name tech companies should serve as a warning to employers about the legal perils of sharing salary data with competitors or agreeing not to poach valuable workers.

This month, Apple, Google, Intel and Adobe agreed to pay $415 million to settle a class-action case arising from employees’ allegations that the companies kept wages artificially low by agreeing not to hire each other’s technical, creative and research employees.

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The companies denied they violated any antitrust laws or engaged in any wrongdoing, but settled with 64,000 employees even after a federal judge increased the damages they must pay.

Three other companies were also part of the original lawsuit but agreed earlier to settle their portion of the claims for $20 million.

Wage-fixing cases are relatively rare, but that’s not necessarily because wage fixing is uncommon.

“What does every successful company want to do?” said Rex Burch, who represents employees on wage cases in Houston. “They want to control costs, and one of the biggest costs for every business is labor.”

But evidence is hard to find, he said, especially if it involves collusion among top executives who might cut deals on a handshake.

The recent high-tech case stemmed from a government investigation that unearthed email evidence about agreements not to hire the employees of competitors. That, in turn, spurred the class-action complaint.

Other times, Burch said, collusion evidence comes to light when an executive is fired and decides to blow the whistle, or is targeted for another legal issue and offers to provide evidence on wage collusion to government prosecutors.

Advance agreements among competing companies on how much they’ll pay for certain jobs are called “horizontal wage fixing,” and they’ve been at the center of earlier cases.

In Detroit, seven hospitals paid $48 million to registered nurses about a year ago to settle claims the health care providers suppressed wages over a four-year period.

Earlier this month, a federal judge gave preliminary approval to a $42 million settlement for the eighth health care defendant in the case. Final approval is scheduled for early 2016.

In Texas, more than a dozen offshore oil drilling companies in Houston agreed in 2001 to settle a wage-fixing case for $75 million. Employees accused them of fixing the wages and benefits of 60,000 laborers over three decades.

The case came to light after a lawyer began to notice that all the offshore workers he talked to about unrelated legal matters seemed to earn the same wages through changes in the market, and no matter which company employed them.

After a labor union accused hospitals of colluding on wage rates, longtime Houston employment lawyer Kerry Notestine suggested that his clients think twice about participating in salary or benefit surveys.

To protect themselves, companies shouldn’t participate in surveys that identify the participating companies, either directly or indirectly, according to Notestine’s client bulletin. Nor should surveys be too frequent, as that might suggest improper motives. And companies should use survey information as only one factor when setting wages.

While emails have played a starring role in some cases, it’s unusual for that evidence to come to light, said Steven Mitby, an antitrust and intellectual property lawyer in Houston. Most of the time, wage fixing involves quiet agreements behind closed doors. Sometimes it’s not even a formal arrangement, he said, because company executives realize that if they poach their rivals’ top employees, the same companies are going to raid them.

That starts a “race to the bottom,” he said, with companies retaliating against each other and costing everyone money.

While hiring is important, retention is a bigger issue for companies, Mitby said. They want to make sure they can keep their top employees. And there are plenty of ways to do that without running into trouble.

Noncompete agreements, for example, prohibit employees from going to work for competitors for a certain period. Nonsolicitation clauses prevent employees who leave companies from hiring away their former co-workers. Trade-secret agreements and restrictions on the use of confidential information also complicate employee job changes.

“You can make it very difficult for someone to move,” Mitby said. “You usually don’t have to resort to heavy-handed tactics to discourage companies from taking employees from each other.”